Testing the relationship between confidence and effort: A behavioral finance perspective on the problem of financial literacy

• Main Authors: Jacob, Louie Bernard A., Rabago, Miguel Angelo S., Tan, Hans Erickson A.
• Format: text
• Language: English
• Published: Animo Repository 2023
• Subjects: Financial literacy—Philippines; Self-confidence—Economic aspects; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etdb_econ/34; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1025&context=etdb_econ
• Institution: De La Salle University

There is longstanding literature on the theoretical basis of self-confidence having motivational value, such that it increases one's desire to exert effort. However, there has been little research to establish empirical evidence to validate this theory in controlled experiments, and there has yet to be any done outside these controlled settings. Our research advances literature on the topic of confidence, motivation, and effort by developing and conducting an online experiment under natural settings on a sample of 85 randomly selected participants to confirm both the role of confidence in motivating effort, and the role of information shaping and influencing confidence, and by extension effort. Our findings prove that there is a causal relationship between confidence and effort, confirming the theory of the motivational value of confidence, and that information on personal ability has a corrective effect on overconfidence which also negatively impacts the motivation to exert effort. Unexpectedly, it was also found that Gender has a role in shaping confidence and, indirectly, effort, as female participants reported significantly higher levels of confidence than male participants, which consequently reflected on their greater effort level.